LookAtVietnam – Local securities experts predict that market pressure from huge stock supplies would continue this year as many enterprises are expected to list stocks or issue shares to increase capital. Their listing applications were rejected last year and they want to reapply this year.
Last year saw 187 new companies listing stocks on the Hochiminh Stock Exchange (Hose) and Hanoi Stock Exchange (HNX). For Hose, 19 enterprises applied to trade shares late last year and will debut on the southern exchange this year. Meanwhile, other large enterprises such as Military Bank, Binh An Fisheries Joint Stock Co., Cement Finance Joint Stock Co. and Ben Thanh Rubber Co. have plans to debut.
According to StoxPlus Financial Media Corp., over 370 enterprises registered to trade an extra 8.1 billion shares on the two bourses last year, of which 5.7 billion shares worth VND47 trillion were issued. Consequently 2.4 billion shares will be launched onto the market this year.
Many listed firms also have plans to increase capital to expand business and production projects given the economic recovery.
Large enterprises such as Vinacomin, Petrolimex and newly-established Vietnam Construction Industry Group have announced plans to equitize their subsidiaries and themselves. This will draw large capital sources into the market.
According to the 2011 investment strategy report of Viet Dragon Securities Co., the new listings and additional issues will make the market more attractive to investors if there is stable growth of stock indices. If not they will have an adverse effect.
The central bank earlier delayed the capital increase requirement for commercial banks until the end of 2011 due to difficulties in the equity market. Around 20 banks fell short of the requirement last year.
Meanwhile, local banks are regulated to spur capital to a minimum VND5 trillion in 2012 and VND10 trillion in 2015, placing a huge stock supply on the market this year and curbing uptrend of both indices in the future.
Economist Le Dat Chi of HCMC Economics University said the market was still waiting for good signs of capital flows, while high inflation and struggles to increase capital wouldn’t help a market that was under big supply pressure.
Meanwhile, Phan Dung Khanh, head of analysis department of Kim Eng Securities Co., said the supply from new listings was not a big challenge to the market as investors would acquire more stocks. Meanwhile, foreign participation is expected to move up strongly this year.
“The point is stock quality. If enterprises perform well and post profits, investors will continue to buy stocks. Otherwise, low-performing firms will not attract any investors,” Khanh said.
Khanh added that managing agencies should tighten listing regulations to better quality of stocks on the market.